Your home budget is getting squeezed

As India’s retail inflation galloped into double-digits — it was 10.09% in October—the question uppermost in everyone’s mind is: will things get worse?

It probably could, as the rupee, which is falling again, can potentially negate the gains of a bumper kharif crop.

The government has been hoping that food prices would start to fall soon as the monsoon was good this year, but onion, which is selling at Rs 80 per kg in some areas, appear have put paid to such hopes. It's pinching, and hard

Retail food inflation (a measure of how costly the platter has become over a 12-month period) was at an alarming 12.56% in October from 11.44% last month.

The price rise is bringing more tears to the common man than what costly onions or high fuel prices suggest.

Family budgets have gone haywire as almost all daily-use products and services from food to footwear, movie tickets to medicines, restaurant meals to deodorants and lipsticks – have turned dearer in the last 12 months.

The same amount of money now buys fewer goods. And it could get worse as the rupee began sliding towards new lows on higher demand for dollars by oil companies as well as foreign funds. This could raise demand for dollars and worsen the rupee further, stoking inflation by making most important goods, such as crude oil, costlier.

Costly crude will push up retail fuel prices, which will push up the cost of transporting goods across locations and knock up prices even higher.

Everybody from tycoons expan­ding their businesses to students mining their pocket money and the government are seeing the writing on the wall, and tightening the belt for a spot of austerity.

“I have started spending less on cosmetics and curtailed visits to beauty parlours as my pocket money is not adequate,” said Bhavya, a college student in Delhi.

In September the government also ordered a set of austerity measures that include only economy class air travel for all officers except secretaries, and a ban on bureaucrats availing “free companion” tickets.

It also asked all ministries and departments to cut non-plan expenditure by 10% for 2013-14 and barred purchase of new vehicles, creation of new posts and conferences at five star hotels.